These are strange times indeed for real estate south of the Fraser River, marked by low inventory, a townhouse and apartment boom outpacing the detached market, an uncertain political climate and bidding wars as far away as Chilliwack – all of this on the heels of a 2016 that broke sales records dating back to 1921.
Industry experts tried to make sense of the frenetic climate at a recent Urban Development Institute (UDI) “Fraser Valley Real Estate Industry Leaders Explore Lies, Damned Lies and Statistics” event in Surrey. Panellist Scott Brown, president and CEO of Fifth Avenue Real Estate Marketing, called his talk “Strange Things are Happening in the Real Estate Industry in the Fraser Valley.”
Brown’s Fifth Avenue is handling marketing for Surrey’s 3 Civic Plaza, which has move-in dates projected for later this year. Prices in the development typify the high costs of real estate in the Fraser Valley, with units in the building starting at $711,900 according to BuzzBuzzHome.com, well above the benchmark price for a townhome ($458,900) or apartment ($295,000) in the Fraser Valley Real Estate Board’s (FVREB) jurisdiction. The price for units at 3 Civic Plaza are also higher than the benchmark price for a townhome ($571,300) and just under the attached-property sales average of $715,400 within the Real Estate Board of Greater Vancouver’s (REBGV) jurisdiction.
At the June 21 event held at the Sheraton Guildford Hotel, Brown spoke about the massive shift in various property markets across the Lower Mainland. According to FVREB sales and listings statistics for May, of the 2,707 sales processed, 620 were townhouses, 609 were apartments and 1,188 were detached homes. This continues a 10-month trend in which attached-home sales were greater than detached-home sales.
“What we’re seeing is our neighbours to the east are starting to behave like our neighbours to the west,” said Brown, noting a trend that has swept through the REBGV’s catchment area. In May, apartments and townhome sales (2,816 combined) were almost double the sale of detached homes (1,548).
Long known as an affordable alternative to pricey detached homes in the REBGV’s jurisdiction, the Fraser Valley market is closing the price gap with its rival. The benchmark price for a single-family detached home in the REBGV sits at $1,561,000, while the FVREB benchmark price is $915,800, a gap that has narrowed over the past year.
“This is a trend we’re watching very closely at Fifth Avenue,” Brown said. “We believe what’s happening is multi-family product is gaining mainstream acceptance, and that means that not only is it harder to develop single-family, but with the affordability issues and challenges, the upcoming generation[’s] … view of the ideal home is not a single-family home with a large yard. They don’t live that way and they don’t want to live that way with their children.”
Outlying communities like Langley and Maple Ridge are experiencing big jumps in price, gaining ground on areas like downtown Surrey and South Surrey. Coupled with an inventory pinch, the Fraser Valley is now seeing lineups at show homes much like Vancouver is, Brown added.
“Inventory levels are just clearly not enough,” he said. “If we look back at the last year I don’t think anybody could have imagined you could sell 100 townhomes in 90 days [in the Fraser Valley]. This year, you’re doing it in a weekend.”
In its June press release, FVREB president Gopal Sahota stated he thinks last year’s all-time record-breaking year for sales and pricing could become the new norm.
“The further we get into this year’s market,” he said, “the less 2016 looks like an anomaly in terms of demand and sales activity.”
UDI panellist Christina Butchart, B.C. regional economist with the Canada Mortgage and Housing Corp., said the drop in real estate sales activity across the Lower Mainland last fall – which picked back up in 2017 – can be only partially attributed to the foreign-buyer tax.
“You have to say it’s a half-truth,” she said. “Because if you look at the adding of the foreign-buyer’s tax, the slowdown actually occurred before that. I think the foreign-buyer’s tax, if it affected anything, it affected consumer confidence, it affected uncertainty around the marketplace.”
The foreign-buyer tax was announced in July 2016 and went into effect the following month. Its biggest effect on the Fraser Valley market appears to have been on potential sellers. By October 2016, inventory across the FVREB’s jurisdiction hit a 10-year low while sales figures continued to break 10-year averages.
Panellist Don Campbell, senior real estate analyst for the Real Estate Investment Network, said market movement in the Fraser Valley is tied to a much bigger macroeconomic shift. He noted millennials – people born between the early 1980s and the early 2000s – recently surpassed baby boomers as the largest working demographic in Canada, and are still mostly waiting for the massive wealth transfer expected to take place. Campbell added that the younger demographic has yet to reach its full purchasing power potential, and won’t for at least a decade.
“What a strange reality we are in,” he said. “The macro demand is really going to be a game-changer.”
Meanwhile, realtors in the Fraser Valley are crying foul over government intervention. Scott Olson, a Surrey-based realtor who has worked on both residential and commercial listings across the Lower Mainland for the past 32 years, said unusual sales, such as that of a Chilliwack townhome that recently sold, in three days, for $22,000 over the asking price, are happening more frequently. He noted it is becoming “common” for properties listed in Surrey and Langley to fetch 20 or more offers each – but said municipal and provincial governments are not doing their part by cutting red tape to allow developers to build new products to quench demand. According to statistics from the FVREB, sales and active listings across the region were down from April and from the same month in 2016.
“The supply-demand curve is out of whack, and political intervention is exacerbating the problem,” Olson said. “Housing is heavily taxed at every level of development. You can’t solve supply-side problems with taxes; they increase the price, which dampens demand by lowering affordability. In our case, though, the demand is so high, all the increase in taxation does is give the government more money.”